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August 31, 2021 | SEC Investigating “Gamification and Behavioral Prompts” in Financial Markets

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

These obvious admissions are ridiculously overdue, but public comments by the new Securities Exchange Commission (SEC) Chair Gary Gensler offer a glimmer of regulatory hope.

Gensler admitted this week that payment for order flow — the back-end payment brokerages receive for directing clients’ trades to market makers — has “an inherent conflict of interest”  and that banning the controversial practice is “on the table.”

Shares of the ironically named customer-abusing-trading platform Robinhood tumbled on the news. Still, the implications are far-reaching:  most major brokerages now collect billions selling their customer orders to predatory trading firms.

The Securities and Exchange Commission also said Friday it is stepping up its inquiry into so-called gamification and behavioral prompts used by online brokerages and investment advisors to prod people to trade more stocks and other securities, adding:

“investors can be misled by rosy projections of profit by technologies that, in reality, understate the risk of a particular investment or the odds of eye-popping returns”.

Do ya think??

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August 31st, 2021

Posted In: Juggling Dynamite

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